Micro Econ Final Exam Review

Marginal revenue is the:

Change in total revenue associated with the sale of one more unit of output

Refer to the diagram. If actual production and consumption occur at Q2.

efficiency is achieved

Economic profits are calculated by subtracting:

explicit and implicit costs from total revenue.

The long run average total cost curve:

indicated the lowest unit costs achievable when a firm has had sufficient time to alter plant size

If a purely competitive firm shuts down in the short run

it will realize a loss equal to its total fixed cost

If a firm decides to produce no output in the short run its cost will be

its fixed cost

The four factors of production are

land, labor, capital, and entrepreneurial ability

monopolistic competition is characterized by a:

large number of firms and low entry barriers

Businesses get their revenue through the ____ market and they make expenditures in ____ market in the circular flow.

product, resource

in an oligopolistic market

products may be standardized or differentiated

A decrease in the price of sugar will

shift the demand curve for sweetener to the left

A firm finds that at its MR=MC= Output (Q= 10 units), its ATC= $100, AVC=$80, AFC= $9, and total recenue is $900. This firm should:

shut down in the short run

Economics may best be defined as the

social science concerned with how individuals, institutions, and society make optimal choices under conditions of scarcity

Which of the following is not correct? A typical production possibilities curve:

specifies how much of each product a society will want to produce.

The basic characteristic of the short run is that:

the firm does not have sufficient time to change the size of its plant.

When diseconomies of scale occur

the long run average total cost curve rises

Because the marginal product of a variable resource at first increases and then decreases as the output of the firm is increased:

total cost at first increases at a decreasing rate and then increases at an incressing rate.

Curve (4) in the diagram is a purely competitive firms:

total cost curve

Price elasticity of demand is always negative, because of the inverse relationship between price and quantity demanded.

yes

If a firm is confronted with economic losses in the short run it would decide whether or not to produce by comparing

Price and minimum average variable cost

Supply is elastic when......(choose as many answers as possible)

Price elasticity of supply is greater than 1, Price elasticity of supply is less than 1

In the short run a purely competitive seller will shut down if

Price is less than average variable cost at all outputs

Because the monopolist's demand curve is downsloping:

Price must be lowered to sell more output

An industry comprised of a very large number of sellers producing a standardized product is known as:

Pure competition

Refer to the diagrams. Firm A is a:

Pure competitor and firm B is a pure monopoly

Other things equal, if the fixed cost of a firm were to increase by $100,000 per year, which of the following would happen?

average fixed costs and average total costs would rise

In the short run the Sure-Screen T-shirt company is producing 500 units of output. Its average variable costs are $2.00 and its average fixed costs are $0.50. The firm's total costs:

are $1,250. TC= 500($2) + 500 ($0.50)

which of the following best expresses the law Of diminishing returns

as successive amounts of one resource (labor) are added to fixed amounts of other resources (capital), beyond some point the resulting extra or marginal output will decline

A monopolistically competitive industry combines elements of both competition and monopoly. it is correct to say that the competitive element results from:

a relatively large number of firms and the monopolistic element from product differentiation

Which of the following is correct

If marginal utility is diminishing and is a positive amount, total utility will increase.

Under pure monopoly, a profit maximizing firm will produce:

In the elastic range of its demand curve

Marginal product

May initially increase , then diminish, and ultimately become negative

Ben is exhausting his money income consuming products A and B in such quantities that MUa/Pa=5 and MUb/Pb=8. Ben should purchase:

More of B and less of A

When a firm does more of something, it gets better at it. This learning-by-doing is:

a source of economics of scale

The law of diminishing returns results in

a total product curve that eventually increases at a decreasing rate.

Graphically, producer surplus is measured as the area

above the supply curve and below the actual price

If the demand for popsicle is relatively elastic, a 10 percent decline in the price of popsicle will

increase the amount demanded by more than 10 percent

The short run average total cost curve is U shaped because:

Of increasing and diminishing returns

An industry comprised of a small number of firms, each of which considers the potential reactions of its rivals in making price-output decisions, is called:

Oligopoly

The diagram shows the production possibilities curve for computers and bicycles. the opportunity cost of one unit of computer between points C and D is

2 bikes

Sofia runs a local juice bar . Her best selling product is "tropical smoothie" . At a price of $1.50 each, she sells 100 each day. At a price of $1.00 each, she sells 300 each day. Price elasticity of demand for "tropical smoothie" is

2.5

Which of the following is a barrier to entry

Patents and licenses

The data below represent a demand schedule. Using the mid-point formula, the price elasticity of demand over the $5-$7 price range is

(0.163), so demand is inelastic

The diagram shows Tom's budget line. Which of the following combinations of goods is unattainable for Tom?

4 units of C and 6 units of D

The first Pepsi yields Craig 18 units of utility and the second yields him an additional 12 units of utility. His total utility from three Pepsis is 38 units of utility. The marginal utility of the third Pepsi is:

8 units of utility

Refer to the diagram. Assuming equilibrium price P1, consumer surplus is represented by areas

A + B

Which of the following is correct

A purely competitive firm is a "price taker" , while a monopolist is a "price maker"

The diagram above shows demand and supply in the market for product A. At the price of $60 in this market, we will have

A surplus of 100 units

For a purely competitive seller, price equals:

All of these. (Average revenue, Marginal revenue, Total revenue divided by output)

Fixed cost is

Any cost that does not change when the firm changes it's output

Assume that the graphs show a competitive market for the product stated in the question. Which of the diagrams illustrates the effect of a governmental tax cut for businesses on the market for corn?

Graph C

Refer to the short run production and cost data. In figure (A) curve (1) is:

Average product & curve 2 is marginal product

The demand curve in a purely competitive industry is ____, while the demand curve to a single firm in that industry is _____.

Downsloping; perfectly elastic.

Refer to the diagram. To maximize profits or minimize losses, this firm should produce:

E units and charge price A

The MR= MC rule can be restated for a purely competitive seller as P= MC because:

Each additional unit of output adds exactly it's price to total revenue

Refer to the diagram for a pure monopolist. Monopoly output will be:

F

On the basis of the above demand and supply data, the supply of this product is inelastic in the $6-$5 price range.

False

The negative externalities problem. an be solved by subsidy by government

False

Total revenues decline when price falls and demand is elastic

False

The ABC Corporation decreases all of its inputs by 12 percent and finds that its output falls by only 8 percent. This means that initially it was producing:

In the range of diseconomies of scale

Look at the diagram above which shows demand and supply in the competitive market for bagel. Other things equal, a shift of the supply curve from S0 to S1 AND a shift of the demand curve from D0 to D1, might be caused by a(n)

Increase in the price of flour, decrease in peoples income

A market: is an institution that brings together buyers and sellers.

Is an institution that brings together buyers and sellers

The marginal revenue curve of a purely competitive firm:

Is horizontal at the market price

Which of the following is characteristic of a pure monopolist demand curve

It is the same as the market demand curve

which of the following statements applies to a purely competitive producer?

It will not advertise its product

Which phrase would be most characteristic of pure monopoly

Sole seller

Assume a firm closes down in the short run and produces no output. Under these conditions:

TFC & TC are positive, but TVC is zero

In the short run:

TVC will increase for a time at a diminishing rate, but then beyond some point will increase at an increasing rate

Which of the following defines marginal utility

The additional satisfaction from consuming one more unit of a product

In comparing the changes in TVC and TC associated with an additional unit of output, we find that:

The changes in TC and TVC are equal

If a variable input is added to some fixed input, beyond some point the resulting extra output will decline. This statement describes:

The law of diminishing returns

If a rational consumer is in equilibrium, which of the following conditions will hold true?

The marginal utility of the last dollar spent on each good purchased will be the same

One defining characteristic of pure monopoly is that

The monopolist produces a product with no close Substitutes

A purely competitive seller is:

a "price taker"

In the long run:

all costs are variable costs

Which of the following is an example of market failure?

all of these

Positive externalities is

an example of demand side market failure and creates underproduction

Economists would describe the U.S. automobile industry as:

an oligopoly

Refer to the diagram, in which S is the market supply curve and S1 is a supply curve comprising all costs of production, including external costs. Assume that the number of people affected by these external costs is large. Without government interference, this market will reach

an overallocation of resources to this product

For most Producing firms

average total costs decline as output is carried to a certain level, and then begin to rise.

The law of diminishing marginal utility states that

beyond some point, additional units of a product will yield less and less extra satisfaction to a consumer

Luke says that "COVID-19 outbrake caused the spike in toilet paper's price ." Jared says that "toilet paper became more expensive due to import reduction from China. " We can conclude that

both statements are positive

The price elasticity of demand coefficient measures:

buyer responsiveness to price changes

Marginal cost is the

change in total cost that results from producing one more unit of output

Compared to tea, we would expect the cross elasticity of demand for

coffee to be positive, but negative for sugar

Refer to the diagram. flow 4 represents

consumer expenditures and business revenue

In the market for a particular pair of jeans, Jackson is willing to pay $55 for a pair and Kate is willing to accept $30 for the same pair as a seller. The actual price in the market is $45. The consumer surplus

for Jackson is $10 and Kates producer surplus is $15

Which of the following is most likely to be a variable cost

fuel and power payments

A price ceiling means that:

government is imposing a legal price that is typically below the equilibrium price.

If you owned a small farm, which of the following would most likely be a fixed cost?

hail insurance

If demand is unit elastic, according to Total Revenue Test,

increase in price will not change the total revenue

Goods Alpha and Beta are close substitutes. If the price of good Alpha falls, then we would expect an

increase in the quantity of Alpha demanded and a decrease in the demand for Beta

Suppose that the total revenue received by a company selling facial masks is $5000 when the price is set at $1.5 per mask and $6200 when the price is set at $2.10 per mask. Without using the midpoint formula, we can tell that demand is

inelastic

The utility of a good or service

is the satisfaction or pleasure one gets from consuming it

If in the short run a firms total product is increasing, then its:

marginal product could be either increasing or decreasing

After eating four slices of pizza, you were offered a fifth slice for free. You turn down the fifth slice. Your refusal indicates that the:

marginal utility is positive for the fourth slice and negative for the fifth slice

To maximize utility, a consumer should allocate money income so that the:

marginal utility obtained from the last dollar spent on each product is the same.

Suppose there is an 8 percent increase in people's income. As a result, economists see a 2 percent decrease in the quantity demanded of good Y. The coefficient of income elasticity of demand is

negative and therefore Y is an inferior good

A demand curve that is parallel to the horizontal axis is

perfectly elastic

If Lone Star College- Cy Fair admits only a fixed number of applicants every year, then the school's supply curve A for admissions is:

perfectly inelastic

When total product is increasing at a decreasing rate, marginal product is:

positive and decreasing

When total product is increasing at an increasing rate, marginal product is:

positive and increasing.

The demand curve shows the relationship between

price and quantity demanded

In the market for ice-cream, the supply decreases and the demand simultaneously increases, then equilibrium

price must decline, but equillibrium quantity may rise, fall, or remain unchanged.

Coffee and tea are substitutes for consumers. An increase in the price of coffee coupled with an increase in the number of tea growers ________ the equilibrium price of a pound of tea and ________ the equilibrium quantity of tea.

probably changes, but more information is needed to determine if it rises or falls; increases

Economies of scale are indicated by:

the declining segment of the long-run average total cost curve

An underproduction happens when

the quantity of goods and service that market produces is less than the equilibrium quantity

Normal profit is:

the return the entrepreneur when economic profits are zero.

Using the graph, to answer: The firm represented by the diagram would maximize its profit where:

the vertical distance between curves (3) and (4) is the greatest

The market system's answer to the fundamental question "Who will get the goods and services?" is essentially

those most willing and able to pay for them

A competitive firm will maximize profits at that output at which:

total revenue exceeds total cost by the greatest amount

The main determinant of elasticity of supply is the amount of time the producer has to adjust inputs in response to a price change

true

The sunshine corporation finds that its costs are $40 when it produces no output. Its total variable costs (TVC) change with output as shown in the accompanying table. Use this information to answer the following question. Refer to the information. The total cost of producing 3 units of output is:

$105. ($105 = $65 + $40)

Refer to the data. The marginal cost of producing the sixth unit of output is:

$8

Which of the following is not a basic characteristic of pure competition

Considerable nonprice competition

In the figure, curves 1, 2, 3, and 4 represent the:

MC, ATC, AVC, and AFC curves respectively.

A consumer is maximizing her utility with a particular money income when:

MUa/Pa = MUb/Pb = MUc/Pc = ... = MUn/Pn.

If a firm wanted to know how much it would save by producing one less unit of output, it would look to:

Marginal Cost

Barnes and Nobles is deciding whether it should decrease the price of its Audio books by 5% since the economy is slowing down due to Covid-19. The company knows that quantity demanded will go up from 4 million to 6 million if there is such a change. Should this company cut the price?

No, because demand is inelastic

The demand schedule or curve confronted by the individual, purely competitive firm is:

Perfectly elastic

The demand curve confronting a non-discriminating pure monopolist is:

The same as the industry's demand curve

The term oligopoly indicates:

a few firms producing either a differentiated or a homogeneous product

Public goods are different from private goods, because they are

are nonrivalry and non excludability.

The law of diminishing returns indicates that:

as extra units of a variable resource are added to a fixed resource , marginal product will decline beyond some point

An industry comprised of 40 firms, none of which has more than 3 percent of the total market for a differentiated product, is an example of:

monopolistic competition

Under monopolistic competition, entry to the industry is:

more difficult than under pure competition but not nearly as difficult as under pure monopoly

There is no relationship between MP & MC

when MP is rising Mc is falling, and when Mp is falling MC is rising

If a firm in a purely competitive industry is confronted with an equilibrium price of $5, it's marginal revenue:

will also be $5